Differences on energy conservation come to light at energy summit

By Bob Sanders

Published: October 23, 2012

Energy efficiency is "one of the things we all agree on," said Sen. Jeanne Shaheen, to a filled-to-capacity banquet room at the 2012 New Hampshire Energy Summit Monday morning at the Holiday Inn in Concord. But how much agreement is there?

While no one was arguing whether or not to conserve energy, the discussion about how to achieve conservation goals was a major undercurrent during the summit, which culminated with the appearance of the two gubernatorial candidates, though not at the same time.

While the conference touched on everything from the low price of natural gas to the increased competition among companies to supply residential customers with electricity, it was the Regional Greenhouse Gas Initiative in particular -- and government subsidies in general -- that was one of the hottest topics at the summit.

RGGI is a 10-state program that requires power producers to bid for allowances to emit gases that contribute to global warming and can then be traded on the open market. The proceeds from the auctions are returned to the states, which can use the funds for energy-efficiency programs, rebates to ratepayers or, as in the case of New Hampshire, to plug holes in the state budget.

If RGGI was a political football, it was Susan Tierney -- managing principal of The Analysis Group and former Assistant Secretary for Policy at the Department of Energy under President Clinton -- who kicked it off, with what she called an extensive "reality check" on the state of New Hampshire's energy picture.

Yes, the state has among the highest energy rates, she said, but because of the state's increased efficiency, it uses less electricity, thus putting it in the "middle of the pack" when it comes to what residents and businesses actually pay.

Indeed, she said, the state's rates have gone down since 2008, and it had the third-lowest rate increase since 1995.Membership in RGGI contributed to this, she argued, in a detailed analysis of the program. Overall, while rates rose 0.7 of a percent because of the program in the RGGI states, it resulted in $1.6 billion of economic value.

That's because the ratepayers don't ship money out of state to buy fuel, but instead spend it locally to weatherize homes and businesses. That efficiency in turn means that the region needs less generating capacity, which brings down the total cost of electricity.

In New Hampshire, that translates into $17 million and 458 jobs -- and that is a conservative estimate, she said, since a large percentage of the funds have not been spent yet.

The more a state uses the auction proceeds for energy efficiency (and the less rebated back to customers), the greater the benefits, Tierney argued.

The Granite State spent all of its money on efficiency before it modified the RGGI funds' use during the last legislative session, as an alternative to outright repeal. It now rebates a significant percentage back to ratepayers.

Tierney said those who benefit from subsidies are consumers and businesses, while it cost producers money.

"It's a transfer from generators to consumers," said Tierney.But according to two producers, Tierney took her eye off the ball when she discounted New Hampshire's high electricity rates.The state had the fifth-highest rates in the nation, emphasized Mike Hachey, vice president of regulatory affairs and compliance for TransCanada Power Marketing, which supplies electricity to commercial and industrial customers.

"I feel less comfortable with those rates," he said, arguing that the consumer should "decide how to use your money more productively," and that government programs end up "charging more rather than lower costs."

Dan Allegretti, vice president of energy policy at Constellation Energy -- which is selling power to both commercial and residential customers -- said his company was fostering energy conservation as part of a total package to make his company more competitive.

The problem with government incentives that drive up the cost of electricity in order to lower it in the future is that "the question is who should bear the risk and take the consequences. We put our own capital at risk.

"The discussion of the merits of RGGI didn't end there. The Retail Merchants Association of New Hampshire praised the program for enabling its members to remain competitive. It was a view echoed by Keith McBrien, a consultant with GDS Associates, who credited subsidies (including RGGI) with enabling two businesses to go forward with energy projects saving them tens of thousands of dollars -- Ragged Mountain Equipment in Intervale and Great North Management in Exeter.

"The incentives bring the payback down to a palliative level," said McBrien. And the program's deadlines help too, "because without the timelines, there is less of a sense of urgency."

During their appearances, differences over RGGI reflected a philosophical difference between the state's two gubernatorial candidates.

While the Democrats' gubernatorial nominee, Maggie Hassan, said she was "proud to be a supporter of RGGI," her Republican opponent, Ovide Lamontagne, said he wants to "eliminate cap-and-trade schemes.

"For Lamontagne, the state's energy policy should be "pro-business and pro-security. Everything else should flow from there."

For Hassan, however, the state should be helping "invest in clean and sustainable energy" and that while the "free market has enormous potential," businesses should "execute within the framework" of "an appropriate incentive structure."

This article appears in the October 19 2012 issue of New Hampshire Business Review